Rick D. Riley, Vice Chairman and President, said, "Our 2012 results reflect increased new business and retention through the low interest rate environment for both of our insurance segments. For the year, our consolidated life insurance premiums increased 5%, driven largely by strong persistency and continued expansion in our international business, where endowment products continue to be our strongest selling product. In addition, we have continued to see modest growth in our home service segment with premiums increasing 1.5% year over year."

Riley added, "We were able to increase invested assets by 7.3% to $901 million from $839 million at year-end 2011 due to premium growth. As a result, we reported investment income growth for the fourth quarter and full year as the higher balances offset the lower yields available in this market. With our conservative investment philosophy, our portfolio is currently yielding just over 3.8% compared with 3.9% in 2011."

(In thousands, except for per share amounts)

Q412

Q411

2012

2011

Premiums

$

46,229

43,982

169,873

161,395

Net investment income

8,422

7,818

31,725

30,099

Net realized investment gains (losses), net

(911)

724

196

765

Change in fair value of warrants

137

(318)

451

1,136

Total revenue

54,070

52,458

202,759

194,156

Net income (loss) applicable to common stock

(297)

1,798

4,529

8,482

Net income (loss) per diluted share of Class A common stock

(0.01)

0.04

0.09

0.17

Diluted weighted average shares of Class A common stock

49,079

48,947

49,005

48,809

Operating income

$

206

1,534

3,882

6,584

"Further, book value per share of Class A common stock increased 6% to $5.25 at December 31, 2012, compared with $4.97 at year-end 2011. The 2012 increase was due primarily to fluctuations in the market values of bonds and stocks in our portfolio," Riley said.

Riley commented, "We recognized investment losses in the quarter ending December 31, 2012 related to a $1.3 million other-than-temporary impairment of one coal producing energy bond issuer. Including that impairment, net realized gains on investments for the full year were lower than the prior year, although we sold previously impaired stock mutual fund holdings in both years. The sale of those securities allowed us to recover taxes paid on prior year gains and to achieve consolidated return tax savings. No warrants were outstanding at December 31, 2012, as they were exercised or expired during the year."

Turning to operating income, Riley noted, "Income for the year was reduced by the pressures of the current low interest rate environment on investment income and reserves. The assumption regarding investment income is a lead driver in the development of reserves and endowment products, which are comprising a significant amount of our new sales, and require higher reserve balances to be established earlier in the product duration. Whole life products, which accumulate initial reserves at a slower pace, were a smaller percentage of new business in 2012."

Reconciliation of Net Income to Operating Income (a non-GAAP measure)

(in thousands, except for per share data)

Q412

Q411

2012

2011

Net Income (loss)

$

(297)

1,798

4,529

8,482

Items excluded in the calculation of operating income:

Net realized investment (gains) and losses

911

(724)

(196)

(765)

Changes in the fair value of warrants

(137)

318

(451)

(1,136)

Pre tax effect of exclusions

774

(406)

(647)

(1,901)

Tax effect at 35%

(271)

142

—

3

Operating income

$

206

1,534

3,882

6,584

Non-GAAP Financial Measures - The table above reconciles Net Income to Operating Income. Operating Income is a "Non-GAAP" financial measure that is widely used in our industry to evaluate the performance of underwriting operations. Operating Income excludes the Fair Value Changes of Warrants and the after-tax net effects of Net Realized Investment Gains and Losses. We believe it presents a useful view of the performance of our insurance operations. While we believe disclosure of certain Non-GAAP information is informative, you should not consider this information without also considering the information we present in accordance with GAAP.

INSURANCE OPERATIONS

Life Insurance - Our Life Insurance segment primarily issues endowment and ordinary whole life insurance in U.S. Dollar-denominated amounts to foreign residents and domestically across the United States.

Premiums – Life insurance premium revenues increased for the fourth quarter and full year of 2012, due to higher international first year and renewal premiums, which have experienced strong persistency as this block of business ages. Improved new business performance in 2012 reflected strong sales from Colombia, Ecuador, Taiwan, and Venezuela. Endowment sales represented $14.3 million or 81.9% of new first year premium as of December 31, 2012 compared to $12.3 million and 69.4% for the year in 2011. In addition, most of our life insurance policies contain a policy loan provision, which allows policyholders to utilize cash value of a policy to pay premiums and keep policies in force. The policy loan asset balance in the life insurance segment increased 10% year over year.

Benefits and expenses – Life insurance benefits and expenses increased more rapidly than premiums for the fourth quarter and full year of 2012 primarily because endowment products require accumulation of higher reserve balances on the front end when compared to whole life products. In addition, death claims increased by 5.3% reflecting more reported claims in 2012 compared to 2011, but was within expected levels. General expenses decreased in 2012 by 7.5% as we continued to promote efficiencies in our operations. Amortization of deferred acquisition costs increased by 9.5% compared to 2011 as the asset balance increases.

Home Service - Our Home Service Insurance segment provides pre-need and final expense ordinary life insurance and annuities to middle and lower income individuals primarily in Louisiana, Mississippi and Arkansas. Our policies in this segment are sold and serviced through funeral homes and a home service marketing distribution system.

Premiums – Home service premiums increased 1.5% over 2011 as this business continues to perform steadily with modest year over year growth.

Benefits and expenses – Home service benefits and expenses increased by 1.7% for the fourth quarter, but were essentially unchanged for the full year of 2012 compared to 2011. Death benefits were up 19.8% and 9.7% for the quarter and year ended December 31, 2012 from 2011 due to more claims reported in the current year. In addition, property claims increased 16.3% to $2.3 million in 2012 compared to 2011 due to Hurricane Isaac, which impacted Louisiana policyholders in the later part of 2012. Both 2012 and 2011 results are negatively impacted by an increase in amortization of deferred acquisition expenses resulting from assumption changes for new issued business relating to the anticipated lower long-term portfolio yield and high lapses experienced in both years. Our home service policyholders have been negatively impacted by the current economic conditions, including continued high levels of unemployment throughout the country.

INVESTMENTS

Invested assets – Total invested assets including cash and cash equivalents grew 9.7% in 2012, reflecting additional premium income from new and renewal business over the past year.

Equity security holdings increased to $53.7 million at year-end 2012 from $46.1 million at year-end 2011 as bond proceeds of approximately $7.6 million were reinvested into bond mutual funds to gain additional yield via shorter duration opportunities.

Cash and cash equivalents represented 5.9% of total cash, cash equivalents and invested assets at year-end 2012, up from 3.8% in 2011. These balances fluctuate based upon the timing of premium receipts and bond maturities and investment into fixed maturity investments.

Investment income – Net investment income increased 7.7% for the quarter ended December 31, 2012, and 5.4% for the full-year. The gains were primarily due to higher average investment balances offsetting the lower yields on invested assets. The policy loan asset balance increased by 10.0% in 2012, resulting in an increase in policy loan income, a component of investment income.

Yield - During 2012, average invested assets increased 8.5% while average yield declined to 3.8% compared with 3.9% in 2011. The average yield for the quarter ended December 31, 2012, was 4.09% compared to 3.47% for the quarter ended December 31, 2011.

Duration - Significant calls by issuers of holdings in our fixed maturity securities portfolio, driven by the sustained low interest rate environment, have led to the reinvestment of proceeds at lower yields as market rates have declined. During 2012, the Company continued significant investments of bonds in state municipals and corporate utility sector issuers with credit ratings ranging from A A to BBB. The Company began increasing investments in investment-grade corporate, municipal bonds and shorter duration bond mutual funds in 2011 to obtain higher yields. The average maturity of the fixed income bond portfolio was 12.0 years with an estimated effective maturity of 6.7 years as of December 31, 2012.

Realized gains – We recorded an other-than-temporary impairment for the three months and year ended December 31, 2012 totaling $1.3 million related to one issuer of bonds in the coal producing energy sector. In 2012 and 2011, the Company sold equity mutual funds, which were previously impaired, and other securities for realized gains of $0.6 million and $1.3 million for tax considerations, respectively.

INVESTOR CONFERENCE CALL

On Tuesday, March 12, Citizens will host a conference call to discuss operating results at 10 a.m. Central Time. The conference call will be hosted by Rick D. Riley, Vice Chairman and President, Kay Osbourn, Chief Financial Officer, and other members of the Company's management team. To participate, please dial (888) 637-2456 and ask to join the Citizens, Inc. call. We recommend accessing the call three to five minutes before the call is scheduled to begin. A recording of the conference call will be available on Citizens' website at www.citizensinc.com in the Investor Information section under News Release & Publications following the call.

ABOUT CITIZENS, INC.

Citizens, Inc. is a financial services company listed on the New York Stock Exchange under the symbol CIA. The Company utilizes a three-pronged strategy for growth based upon worldwide sales of U.S. Dollar-denominated whole life cash value insurance policies, life insurance product sales in the U.S. and the acquisition of other U.S. based life insurance companies.

SAFE HARBOR

Information herein contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which can be identified by words such as "may," "will," "expect," "anticipate" or "continue" or comparable words. In addition, all statements other than statements of historical facts that address activities that the Company expects or anticipates will or may occur in the future are forward-looking statements. Readers are encouraged to read the SEC reports of the Company, particularly its Form 10-K for the fiscal year ended December 31, 2012, its quarterly reports on Form 10-Q and its current reports on Form 8-K, for the meaningful cautionary language disclosing why actual results may vary materially from those anticipated by management. The Company undertakes no duty or obligation to update any forward-looking statements contained in this release as a result of new information, future events or changes in the Company's expectations. The Company also disclaims any duty to comment upon or correct information that may be contained in reports published by the investment community.